BT's plans to plough £1.5bn into upgrading its broadband network were boosted yesterday when the telecoms watchdog promised not to hinder it from making a return on its investment.

The BT plan is a key part of the government's project for British homes to have access to next-generation broadband at speeds up to 10 times higher than those available now, allowing members of a household to use different high-bandwidth services at the same time.

Ofcom, the telecoms regulator, yesterday gave BT free rein to set the prices rivals such as BSkyB and Carphone Warehouse will have to pay to gain access to the improved network.

BT chief executive Ian Livingston said yesterday's announcement would allow it to press ahead with its plans. The company has faced calls from some investors to delay and conserve cash in the downturn as it deals with a pension deficit and a writedown on the value of its global services consultancy division.

"This is an important step and will allow the market to develop the next generation of the UK's broadband infrastructure, which is so critical to the UK's future as a knowledge-based economy," Livingston said.

"The stage is now set for a wide variety of players, of all different shapes and sizes, to do their bit in providing consumers with a choice for superfast and innovative services. Now it's all about delivery."

Under the existing broadband regime, Ofcom regulates the prices charged by BT's local networks division, Openreach.

The terms of that arrangement are under review, with BT lobbying for the right to increase prices.

BT's freedom from regulation in super-fast broadband will not allow it to exploit rivals, however. Openreach will have to charge all customers, including the separate BT Retail division, "on equal terms and without favour".

Ofcom's concession to BT is designed to help it implement plans announced last summer to build a superfast network covering 10m homes, about 40% of UK households, by 2012.

BT's proposal involves running fibre optic cables to roadside cabinets and even direct to some premises, offering speeds of between 40Mb and 100Mb a second.

Ofcom wants the private sector to bear the burden for meetings its goal of providing a superfast network across the UK, despite the onset of the recession.

Virgin Media has stolen a march on competitors by moving ahead with a rapid upgrade of its cable network. By the end of the year the company will offer speeds of up to 50Mb a second across its whole network, which covers 50% of the population.

Ofcom chief executive Ed Richards said: "Our message today is clear: there are no regulatory barriers in the way of investment in superfast broadband; we want to promote investment but also ensure that there is fair and effective competition for the future."

Communications minister Lord Carter will set out the government's position on how to develop superfast broadband when he delivers his final Digital Britain report in early summer.